Intrinsic value of Denbury Resources - DNR

Previous Close

$1.14

  Intrinsic Value

$0.30

stock screener

  Rating & Target

str. sell

-74%

  Value-price divergence*

+5%

Previous close

$1.14

 
Intrinsic value

$0.30

 
Up/down potential

-74%

 
Rating

str. sell

 
Value-price divergence*

+5%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of DNR stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -22.42
  2.40
  2.66
  2.89
  3.10
  3.29
  3.46
  3.62
  3.76
  3.88
  3.99
  4.09
  4.18
  4.27
  4.34
  4.41
  4.46
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
Revenue, $m
  976
  999
  1,026
  1,056
  1,088
  1,124
  1,163
  1,205
  1,251
  1,299
  1,351
  1,406
  1,465
  1,528
  1,594
  1,664
  1,739
  1,817
  1,900
  1,988
  2,080
  2,177
  2,280
  2,388
  2,502
  2,622
  2,748
  2,881
  3,021
  3,168
  3,322
Variable operating expenses, $m
 
  6,016
  6,176
  6,354
  6,552
  6,767
  7,002
  7,255
  7,528
  7,820
  8,132
  8,465
  8,819
  9,195
  9,594
  10,017
  10,464
  10,937
  11,436
  11,964
  12,520
  13,106
  13,724
  14,375
  15,061
  15,783
  16,542
  17,342
  18,183
  19,067
  19,997
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  2,243
  6,016
  6,176
  6,354
  6,552
  6,767
  7,002
  7,255
  7,528
  7,820
  8,132
  8,465
  8,819
  9,195
  9,594
  10,017
  10,464
  10,937
  11,436
  11,964
  12,520
  13,106
  13,724
  14,375
  15,061
  15,783
  16,542
  17,342
  18,183
  19,067
  19,997
Operating income, $m
  -1,267
  -5,016
  -5,150
  -5,299
  -5,463
  -5,643
  -5,839
  -6,050
  -6,277
  -6,521
  -6,781
  -7,059
  -7,354
  -7,668
  -8,000
  -8,353
  -8,726
  -9,120
  -9,536
  -9,976
  -10,440
  -10,929
  -11,444
  -11,987
  -12,559
  -13,161
  -13,794
  -14,461
  -15,162
  -15,899
  -16,675
EBITDA, $m
  -421
  -4,144
  -4,254
  -4,378
  -4,514
  -4,662
  -4,824
  -4,998
  -5,186
  -5,387
  -5,602
  -5,832
  -6,076
  -6,335
  -6,610
  -6,901
  -7,209
  -7,535
  -7,879
  -8,242
  -8,625
  -9,029
  -9,455
  -9,903
  -10,376
  -10,873
  -11,396
  -11,947
  -12,526
  -13,136
  -13,776
Interest expense (income), $m
  131
  126
  130
  134
  139
  144
  150
  157
  163
  171
  179
  187
  196
  206
  216
  227
  239
  251
  264
  277
  292
  307
  323
  340
  357
  376
  396
  416
  438
  461
  485
Earnings before tax, $m
  -1,520
  -5,142
  -5,279
  -5,433
  -5,602
  -5,787
  -5,989
  -6,206
  -6,440
  -6,692
  -6,960
  -7,246
  -7,550
  -7,874
  -8,217
  -8,580
  -8,964
  -9,371
  -9,800
  -10,253
  -10,731
  -11,236
  -11,767
  -12,327
  -12,916
  -13,537
  -14,190
  -14,877
  -15,600
  -16,360
  -17,160
Tax expense, $m
  -544
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -976
  -5,142
  -5,279
  -5,433
  -5,602
  -5,787
  -5,989
  -6,206
  -6,440
  -6,692
  -6,960
  -7,246
  -7,550
  -7,874
  -8,217
  -8,580
  -8,964
  -9,371
  -9,800
  -10,253
  -10,731
  -11,236
  -11,767
  -12,327
  -12,916
  -13,537
  -14,190
  -14,877
  -15,600
  -16,360
  -17,160

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  4,275
  4,383
  4,500
  4,630
  4,774
  4,931
  5,102
  5,287
  5,485
  5,698
  5,926
  6,168
  6,426
  6,701
  6,991
  7,299
  7,625
  7,970
  8,334
  8,718
  9,123
  9,550
  10,001
  10,475
  10,975
  11,501
  12,054
  12,637
  13,249
  13,894
  14,572
Adjusted assets (=assets-cash), $m
  4,273
  4,383
  4,500
  4,630
  4,774
  4,931
  5,102
  5,287
  5,485
  5,698
  5,926
  6,168
  6,426
  6,701
  6,991
  7,299
  7,625
  7,970
  8,334
  8,718
  9,123
  9,550
  10,001
  10,475
  10,975
  11,501
  12,054
  12,637
  13,249
  13,894
  14,572
Revenue / Adjusted assets
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
  0.228
Average production assets, $m
  4,683
  4,795
  4,923
  5,065
  5,223
  5,395
  5,581
  5,783
  6,001
  6,234
  6,482
  6,748
  7,030
  7,330
  7,648
  7,985
  8,341
  8,718
  9,116
  9,537
  9,980
  10,447
  10,940
  11,459
  12,006
  12,581
  13,187
  13,824
  14,494
  15,199
  15,940
Working capital, $m
  -253
  -176
  -181
  -186
  -192
  -198
  -205
  -212
  -220
  -229
  -238
  -248
  -258
  -269
  -281
  -293
  -306
  -320
  -334
  -350
  -366
  -383
  -401
  -420
  -440
  -461
  -484
  -507
  -532
  -558
  -585
Total debt, $m
  2,993
  3,087
  3,191
  3,307
  3,435
  3,575
  3,727
  3,891
  4,068
  4,257
  4,460
  4,676
  4,905
  5,149
  5,408
  5,682
  5,972
  6,279
  6,603
  6,945
  7,305
  7,686
  8,087
  8,509
  8,953
  9,422
  9,914
  10,433
  10,978
  11,552
  12,155
Total liabilities, $m
  3,806
  3,901
  4,005
  4,121
  4,249
  4,389
  4,541
  4,705
  4,882
  5,071
  5,274
  5,490
  5,719
  5,963
  6,222
  6,496
  6,786
  7,093
  7,417
  7,759
  8,119
  8,500
  8,901
  9,323
  9,767
  10,236
  10,728
  11,247
  11,792
  12,366
  12,969
Total equity, $m
  468
  482
  495
  509
  525
  542
  561
  582
  603
  627
  652
  679
  707
  737
  769
  803
  839
  877
  917
  959
  1,004
  1,051
  1,100
  1,152
  1,207
  1,265
  1,326
  1,390
  1,457
  1,528
  1,603
Total liabilities and equity, $m
  4,274
  4,383
  4,500
  4,630
  4,774
  4,931
  5,102
  5,287
  5,485
  5,698
  5,926
  6,169
  6,426
  6,700
  6,991
  7,299
  7,625
  7,970
  8,334
  8,718
  9,123
  9,551
  10,001
  10,475
  10,974
  11,501
  12,054
  12,637
  13,249
  13,894
  14,572
Debt-to-equity ratio
  6.395
  6.400
  6.450
  6.490
  6.540
  6.590
  6.640
  6.690
  6.740
  6.790
  6.840
  6.890
  6.940
  6.990
  7.030
  7.080
  7.120
  7.160
  7.200
  7.240
  7.280
  7.320
  7.350
  7.380
  7.420
  7.450
  7.480
  7.510
  7.530
  7.560
  7.580
Adjusted equity ratio
  0.109
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110
  0.110

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -976
  -5,142
  -5,279
  -5,433
  -5,602
  -5,787
  -5,989
  -6,206
  -6,440
  -6,692
  -6,960
  -7,246
  -7,550
  -7,874
  -8,217
  -8,580
  -8,964
  -9,371
  -9,800
  -10,253
  -10,731
  -11,236
  -11,767
  -12,327
  -12,916
  -13,537
  -14,190
  -14,877
  -15,600
  -16,360
  -17,160
Depreciation, amort., depletion, $m
  846
  872
  895
  921
  950
  981
  1,015
  1,052
  1,091
  1,133
  1,179
  1,227
  1,278
  1,333
  1,391
  1,452
  1,517
  1,585
  1,658
  1,734
  1,815
  1,900
  1,989
  2,083
  2,183
  2,287
  2,398
  2,513
  2,635
  2,763
  2,898
Funds from operations, $m
  174
  -4,270
  -4,384
  -4,512
  -4,652
  -4,806
  -4,974
  -5,155
  -5,349
  -5,558
  -5,781
  -6,019
  -6,272
  -6,541
  -6,826
  -7,128
  -7,448
  -7,786
  -8,143
  -8,519
  -8,917
  -9,336
  -9,778
  -10,243
  -10,733
  -11,249
  -11,792
  -12,364
  -12,965
  -13,597
  -14,262
Change in working capital, $m
  -45
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
Cash from operations, $m
  219
  -4,266
  -4,379
  -4,506
  -4,647
  -4,800
  -4,967
  -5,147
  -5,341
  -5,550
  -5,772
  -6,009
  -6,262
  -6,530
  -6,814
  -7,116
  -7,435
  -7,772
  -8,128
  -8,504
  -8,901
  -9,319
  -9,760
  -10,224
  -10,713
  -11,228
  -11,770
  -12,340
  -12,940
  -13,571
  -14,234
Maintenance CAPEX, $m
  0
  -851
  -872
  -895
  -921
  -950
  -981
  -1,015
  -1,052
  -1,091
  -1,133
  -1,179
  -1,227
  -1,278
  -1,333
  -1,391
  -1,452
  -1,517
  -1,585
  -1,658
  -1,734
  -1,815
  -1,900
  -1,989
  -2,083
  -2,183
  -2,287
  -2,398
  -2,513
  -2,635
  -2,763
New CAPEX, $m
  -253
  -113
  -128
  -142
  -157
  -172
  -187
  -202
  -217
  -233
  -249
  -265
  -282
  -300
  -318
  -337
  -357
  -377
  -398
  -420
  -443
  -467
  -493
  -519
  -547
  -575
  -606
  -637
  -670
  -705
  -741
Cash from investing activities, $m
  -205
  -964
  -1,000
  -1,037
  -1,078
  -1,122
  -1,168
  -1,217
  -1,269
  -1,324
  -1,382
  -1,444
  -1,509
  -1,578
  -1,651
  -1,728
  -1,809
  -1,894
  -1,983
  -2,078
  -2,177
  -2,282
  -2,393
  -2,508
  -2,630
  -2,758
  -2,893
  -3,035
  -3,183
  -3,340
  -3,504
Free cash flow, $m
  14
  -5,230
  -5,379
  -5,544
  -5,725
  -5,922
  -6,135
  -6,364
  -6,610
  -6,873
  -7,154
  -7,453
  -7,771
  -8,108
  -8,465
  -8,843
  -9,243
  -9,665
  -10,111
  -10,582
  -11,078
  -11,601
  -12,152
  -12,732
  -13,343
  -13,986
  -14,663
  -15,375
  -16,124
  -16,911
  -17,739
Issuance/(repayment) of debt, $m
  20
  96
  104
  116
  128
  140
  152
  164
  177
  189
  202
  216
  230
  244
  259
  274
  290
  307
  324
  342
  361
  380
  401
  422
  445
  468
  493
  518
  545
  574
  603
Issuance/(repurchase) of shares, $m
  0
  5,156
  5,292
  5,447
  5,618
  5,805
  6,007
  6,227
  6,462
  6,715
  6,985
  7,273
  7,579
  7,904
  8,249
  8,614
  9,000
  9,409
  9,840
  10,296
  10,776
  11,283
  11,816
  12,379
  12,971
  13,594
  14,251
  14,941
  15,667
  16,431
  17,234
Cash from financing (excl. dividends), $m  
  -15
  5,252
  5,396
  5,563
  5,746
  5,945
  6,159
  6,391
  6,639
  6,904
  7,187
  7,489
  7,809
  8,148
  8,508
  8,888
  9,290
  9,716
  10,164
  10,638
  11,137
  11,663
  12,217
  12,801
  13,416
  14,062
  14,744
  15,459
  16,212
  17,005
  17,837
Total cash flow (excl. dividends), $m
  -1
  22
  17
  19
  21
  23
  25
  27
  29
  31
  33
  35
  37
  40
  42
  45
  47
  50
  53
  56
  59
  62
  65
  69
  72
  76
  80
  85
  89
  93
  98
Retained Cash Flow (-), $m
  781
  -5,156
  -5,292
  -5,447
  -5,618
  -5,805
  -6,007
  -6,227
  -6,462
  -6,715
  -6,985
  -7,273
  -7,579
  -7,904
  -8,249
  -8,614
  -9,000
  -9,409
  -9,840
  -10,296
  -10,776
  -11,283
  -11,816
  -12,379
  -12,971
  -13,594
  -14,251
  -14,941
  -15,667
  -16,431
  -17,234
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -5,134
  -5,275
  -5,428
  -5,597
  -5,782
  -5,983
  -6,200
  -6,434
  -6,684
  -6,952
  -7,237
  -7,541
  -7,864
  -8,206
  -8,569
  -8,953
  -9,359
  -9,787
  -10,240
  -10,717
  -11,221
  -11,751
  -12,310
  -12,899
  -13,518
  -14,170
  -14,857
  -15,578
  -16,338
  -17,136
Discount rate, %
 
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.18
  22.23
  23.35
  24.51
  25.74
  27.03
  28.38
  29.80
  31.29
  32.85
  34.49
  36.22
  38.03
  39.93
  41.93
  44.02
  46.22
  48.53
  50.96
  53.51
PV of cash for distribution, $m
 
  -4,543
  -4,084
  -3,632
  -3,195
  -2,776
  -2,382
  -2,014
  -1,678
  -1,375
  -1,107
  -875
  -678
  -514
  -381
  -276
  -195
  -134
  -90
  -58
  -37
  -22
  -13
  -7
  -4
  -2
  -1
  -1
  0
  0
  0
Current shareholders' claim on cash, %
  100
  8.0
  0.6
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Denbury Resources Inc. is an independent oil and natural gas company. The Company's operations are focused in two operating areas: the Gulf Coast and Rocky Mountain regions. Its properties with proved and producing reserves in the Gulf Coast region are situated in Mississippi, Texas, Louisiana and Alabama, and in the Rocky Mountain region are situated in Montana, North Dakota and Wyoming. It had an estimated proved oil and natural gas reserves of 254.5 million barrels of oil equivalent (MMBOE) as of December 31, 2016. Its primary Gulf Coast carbon dioxide (CO2) source is Jackson Dome, which is located near Jackson, Mississippi. Its mature group of properties includes the initial CO2 field, Little Creek, and other fields, including Brookhaven, Cranfield, Eucutta, Lockhart Crossing, Mallalieu and Soso fields. Its LaBarge Field is located in southwestern Wyoming. Its Riley Ridge Federal Unit is located in southwestern Wyoming and produces gas from the same LaBarge Field.

FINANCIAL RATIOS  of  Denbury Resources (DNR)

Valuation Ratios
P/E Ratio -0.5
Price to Sales 0.5
Price to Book 1
Price to Tangible Book
Price to Cash Flow 2.1
Price to Free Cash Flow -13.4
Growth Rates
Sales Growth Rate -22.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -55%
Cap. Spend. - 3 Yr. Gr. Rate -27.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 621.8%
Total Debt to Equity 639.5%
Interest Coverage -11
Management Effectiveness
Return On Assets -17.6%
Ret/ On Assets - 3 Yr. Avg. -19.2%
Return On Total Capital -24.4%
Ret/ On T. Cap. - 3 Yr. Avg. -26.8%
Return On Equity -113.7%
Return On Equity - 3 Yr. Avg. -76.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 99.6%
Gross Margin - 3 Yr. Avg. 99.4%
EBITDA Margin -55.6%
EBITDA Margin - 3 Yr. Avg. -143.5%
Operating Margin -129.8%
Oper. Margin - 3 Yr. Avg. -201.7%
Pre-Tax Margin -155.7%
Pre-Tax Margin - 3 Yr. Avg. -205.5%
Net Profit Margin -100%
Net Profit Margin - 3 Yr. Avg. -140.8%
Effective Tax Rate 35.8%
Eff/ Tax Rate - 3 Yr. Avg. 34.8%
Payout Ratio 0%

DNR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DNR stock intrinsic value calculation we used $976 million for the last fiscal year's total revenue generated by Denbury Resources. The default revenue input number comes from 2016 income statement of Denbury Resources. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our DNR stock valuation model: a) initial revenue growth rate of 2.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 13%, whose default value for DNR is calculated based on our internal credit rating of Denbury Resources, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Denbury Resources.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of DNR stock the variable cost ratio is equal to 601.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for DNR stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.2% for Denbury Resources.

Corporate tax rate of 27% is the nominal tax rate for Denbury Resources. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the DNR stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for DNR are equal to 479.8%.

Life of production assets of 5.5 years is the average useful life of capital assets used in Denbury Resources operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for DNR is equal to -17.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $468 million for Denbury Resources - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 395.369 million for Denbury Resources is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Denbury Resources at the current share price and the inputted number of shares is $0.5 billion.

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Financial statements of DNR
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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